Q1) It can be expensive and time consuming to issue new common equity. The costs involved with issuing new common equity are called flotation costs. Issuing new equity means that the current shareholders share the organization with others. If the organization is successful, the owners may not be so willing to share the organization's ownership. This implies that the choice of debt or equity can have signaling features.
Q2) How reliable are ratios when used to evaluate fast-growing companies? How is it used to evaluate fast-evolving economic sectors such as Internet companies? How are ratios helpful in evaluating turnarounds? What is the best measure of performance for companies in cyclical sectors?